We currently have a business customer who we would like to exempt from CTR's that was established mid-November. CTR reporting is done almost daily so they do follow the exemption rule of 5 or more CTR's during the previous year. We have a couple of different questions regarding the possible exemption:

1.) If the business was newly incorporated in November of 2015, what do I need to ask for to show proof that no more than 50 percent of its gross revenues per year are derived from one or more of the ineligible activities, such as lottery sales?

2.) If there is currently some questionable activity involving these accounts - can we proceed with the Phase II exemption? Or would the fact that there is possible questionable activity (such as check kiting) put a stop to the exemption?

Help with both of these questions would be greatly appreciated!

Thanks,
Lisa

My first observation would be that if there is even a hint that they a check kiting, why are they still customers??

My second observation is if you have opened an account for a brand new business that is depositing that much cash and your original due diligence didn't include enough information to determine whether gross revenues would qualify, I would say your original due diligence was sorely lacking.

1. You could ask for any financial records (P&L, Tax Return) that may evidence the breakdown of their income. If you are only concerned about lottery sales, I would think that the income derived from them (unless in some special circumstance) would usually be dwarfed by other income.

2. Would questionable activity stop the filing of an exemption? No. But why would you want to file an exemption if you suspect questionable activity and may have to either file some report or close the account?

Per FinCEN's guidance (FIN-2009-G001), the higher the degree of concern you have that they may not qualify, the more due diligence you should perform to evidence their eligibility. Based on what you've described, a self-certification form signed by the customer should be sufficient. You could also review their accounts to estimate if you have no other concerns from an exemption eligibility perspective - remember that lottery revenue does not equal the volume of deposits in their lottery account.



Technically, you can still exempt them (see FIN-2012-G003, question F). But that would not be prudent, in my opinion.

They are routinely making large cash deposits, but the account velocity is so great that you suspect kiting? This customer is a borrower, not a depositor. You need to show them the door.

I'm not the BSA officer here at our bank but I asked this question on her behalf because she has been struggling with what to do with this customer for a while now. I will tell you that we have both agreed in the past that we thought the accounts should be closed out but have had trouble getting everyone to go along with it. Your answers just go along with what we have always believed....

Thanks for the responses!